What You Need to Know About Short-Term Health Insurance

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What You Need to Know About Short-Term Health Insurance

Short-term health insurance offers a temporary insurance solution, or so is its intent. A gap in insurance due to a job change, while waiting for Medicare or other coverage to begin, or being outside the open enrollment period proves a viable situation to obtain short-term policies.

You may also know this coverage as temporary, term or gap health insurance. Short-term coverage works well in some cases to ensure you and your family are financially protected in the unfortunate event of an accident or illness. However, consider the points below to determine if this fix is the best option for your situation.

The Benefits of Short-Term Insurance

Financially and medically protecting your family while between policies or waiting on insurance proves frugal with short-term options. The following benefits tend to run true of most temporary policies. Keep in mind, however, that term policies vary just as long-term insurance policies do. Checking the details of the plan you intend to purchase makes for wise decision-making.

At-Will Cancellations

Short-term insurance offers the option of starting your policy inside and outside annual enrolment periods. This fact means no waiting for enrollment dates to roll around before getting coverage. Furthermore, no penalty exists if you cancel the policy early, usually after three months of coverage. Premiums paid in excess are often refunded.

Reducible Premiums

With a variety of term policies available, finding one to fit your budget is possible. You select the people covered and maintain some flexibility in how they are covered. For instance, choosing fewer benefits or a higher deductible reduces your premium. Furthermore, in-full, up-front payments offer a discount.

The Cautions of Short-Term Insurance

While the benefits of temporary insurance seem to make this choice a no-brainer, again, caution is required. The limits and issues of this type of policy make it impractical for some individuals and families. Again, policies vary. However, the following cautions arise with all short-term options.

Limits Exist

Short-term policies tend to cover major health issues only and no prescriptions. Preventative care is not covered either. These limits leave your family unprotected for lesser health issues and drug therapy. Check policies carefully to understand exactly what coverage you can expect. Also, temporary policies are not renewable. Available in one-month windows for approximately one year, this insurance ends whether another policy kicks in or not.

Denial is a Possibility

While obtaining health insurance is mandatory, short-term policy applicants can be denied. And, they are. In other words, your medical history may exclude you from certain policies. Long-term plans are not permitted to deny your application based on medical history under the Affordable Care Act (ACA). The same rules do not apply to short-term insurance. Post-claim underwriting allows for denial of specific claims as well.

Pre-existing Causes Problems

In most cases, pre-existing conditions fall outside the coverage of gap policies. Your state’s definition of pre-existing comes into play here, and medical underwriting is required. However, generally speaking, diagnosis or treatment within the last two to five years denies coverage. Furthermore, these policies fail to cover maternity leave should you or your spouse become pregnant.

Pay for Better Coverage

Options exist to lower short-term insurance premiums. And, the premiums run lower than long-term options. However, you get what you pay for. Reduced premiums mean less coverage and higher deductibles, meaning you pay more out of your pocket. The average premiums run around $110 and the average deductible to be $3,589.

ACA Not Met

Short-term insurance policies do not meet the requirements of the ACA. They fail to qualify as the minimum essential coverage or mandated coverage. Financial penalties exist for those with gap policies unless other exemptions apply. Furthermore, these temporary plans do not qualify for tax subsidies. These breaks exist only under ACA.

The Long and Short of It

With a rise in short-term health applicants, according to Ehealth, gap policies prove worth a look. While the drawbacks lend caution, many health insurance consumers find them attractive when between open enrollment periods or when landing between premium subsidy and Medicaid qualifications.

Calculating the costs of short-term insurance options and penalties helps you discern the best option for you and your family regarding long and short-term insurances. While not a long-term solutions, in some cases, the benefits of short-term coverage outweigh the costs associated, including penalties.